Soaring demand accelerates growth for electric vehicle battery makers
TOKYO: Electric vehicle battery makers Contemporary Amperex Technology, LG Chem, Panasonic Corporation and SK Innovation, which account for more than half of global production are set to benefit from rising battery demand, according to Moody’s Investors Service.
But a sharp rise in production will pose operational risks and increase the challenge of keeping leverage stable, according to a new report from Moody’s Japan KK.
“Automakers’ compliance with emission standards will increase battery electric vehicle (BEV) and battery production amid tightening carbon regulations,” said Motoki Yanase, Moody’s Vice President and Senior Credit Officer.
The International Energy Agency projects global battery capacity for BEVs and plug-in hybrid vehicles will grow by 24 per cent on a compounded annual basis between 2020 and 2030.
“Although this will drive battery makers’ production volumes and revenues - and in turn their profits - large investments for rapid expansion comes with operational risks and the challenge of maintaining healthy leverage, all of which could weaken credit quality,” said Yanase.
Strong battery maker-automaker relationships will be critical for EV battery makers’ credit quality. Those with solid relationships with automakers that have a clear strategy to expand BEV sales will see their revenue and profit stay stable.
Among the four rated battery makers, Contemporary Amperex Technology’s margin will remain the highest and stay around low double-digits over the next 12 to 18 months, thanks to high capacity utilisation and China’s EV subsidies. In comparison, other battery makers’ margins are single-digit or less.
Maintaining healthy financial leverage against increasing investment will also be key for battery makers’ credit quality. Moody’s expects LG Chem and Panasonic’s EBITDA growth will keep pace with debt increases, such that their leverage (debt/ EBITDA) will be between 2.0x and 3.0x in the next 12 to 18 months.
Meanwhile, Contemporary Amperex Technology’s net cash position will support its credit quality and SK Innovation’s higher leverage, and thus lower rating reflects the weakness in its refining and petrochemical businesses and heavy capital spending.
NEW DELHI: India’s GDP grew by 0.4 per cent in the October to December quarter (Q3 FY21), marking a return to a positive zone after two-quarters of recession but showing a lingering weakness in the economy, government data showed on Friday.
A sharp improvement in the COVID-19 situation and rising public spending are the two factors behind the uptick.
“The GDP at constant (201112) prices in Q3 of 2020-21 is estimated at Rs 36.22 lakh crore as against Rs 36.08 lakh crore in Q3 of 2019-20, showing a growth of 0.4 per cent,” said the National Statistical Office (NSO).
A continuing fall in domestic consumption is seen as a strong reason behind the sluggish pace.
According to second advance estimates of economic growth, the real GDP in the current financial year (2020-21) is estimated at negative 8 per cent as compared to the growth rate of 4 per cent in 2019-20.
The agriculture sector is estimated to see a growth of 3 per cent in FY21 as compared to 4.3 per cent in 2019-20.
The manufacturing sector is likely to contract by 8.4 per cent during FY21.